Salvage integration: a vehicle for satisfaction: recoup costs, streamline total losses.
From the perspective of a total loss, the assignment of salvage must be made as early as possible, preferably at FNOL. This, of course, requires the insurer to swiftly categorize the vehicle as a total loss after weighing factors such as the age of the vehicle and extent of damage inflicted.
Partnering with the right salvage specialist represents half the battle. As we'll discuss, insurers must also employ the appropriate technology platform to optimize work flow in order to avoid unnecessary bottlenecks and towing expenses.
Driving Policyholder Loyalty
Filing a claim is a moment of truth for any auto insurance policyholder. The level of satisfaction about how the claim--routinely the customer's only direct interaction with the insurer since purchasing the policy--was handled ultimately drives either customer loyalty or discord. Policyholders often manifest their disappointment with negative ramblings to others and, in many cases, by severing the relationship altogether and seeking coverage with another insurer.
The nature of total losses presents insurers with substantial challenges. According to recent surveys by J.D. Power and Associates, total loss claims tend to conjure more customer malcontent when compared to auto claims involving repairable rides. The Westlake Village, Calif.-based company, which has been charting customer satisfaction levels in the auto physical damage realm for more than 10 years, acknowledges that some dissatisfaction is largely unavoidable.
"Auto claims resulting in a total loss tend to be more complex, compared with vehicle repair claims, because in addition to filing a claim, claimants also have to purchase a replacement vehicle," said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates, in reference to the 2011 survey.
Regardless, there are ways to ensure the policyholder/insurer rapport does not go the way of the wrecked vehicle. To speed processing, and thus the road to indemnity, insurers must take a long, hard look at the work flow, including supporting technologies.
"A huge amount of focus historically has been on what gets written into the estimate," says Paul Rosenstein, vice president of claims solutions for Mitchell International. "This includes whether the estimate reflects the loss severity accurately and if we are settling the total loss efficiently and fairly."
As such, Rosenstein says there historically wasn't a refined focus on other aspects of the workflow or other aspects of the loss payout, such as:
* Are we getting fair salvage returns?
* Are we controlling our rental and towing costs through workflow?
"As claims organizations have become more focused on efficiency and the insurance industry has become more competitive on the macro level, however, integration of salvage options has commanded attention," he says.
This is where technology solutions and relationships with salvage vendors come into play, Rosenstein explains.
"Over the past 8 or 10 years, there has been a lot of consolidation where smaller yards are bought by several large players," he says. "This lends itself to more of a vendor management approach on claims department side, where they are making a more central decision as to which company to send salvage."
Vendor Relationship Management
As a result, insurers take into account a variety of factors before selecting a vendor with whom to partner. Common criteria in selecting salvage vendors include:
* The breadth of the salvage company's geographic coverage area
* The strength of technology to bring more buyers in and thus get better salvage return for the insurer.
* Name brand recognition on the national level.
"Some insurers are bypassing salvage yards for specific types of salvage to basically work with a targeted set of buyers to bypass the middle man," Rosenstein adds. "Salvage yards charge fees for storage or titling or just to conduct auction different things. With lower value salvage, insurers can actually be "upside down," meaning they end up owing money to salvage yard. For instance, let's imagine that a 1998 Toyota Camry gets totaled. Although its market value could be $500, the associated salvage fees could total $600. Companies such as Copart and IAA are aware of this conundrum and are actually trying to solve the problem."
Technology At Work
"Generally speaking, if an insurer has not fully considered the process and workflow, then it will prove difficult to optimize the claims handling," Rosenstein continues. "There can be a one- or two-day lag between declaring a total loss and handing that off to whoever coordinates salvage [at the company]. Without workload triggers, it is easy to lose two to three days in the process between totaling the car and getting it assigned to the salvage yard. Our solution ensures that transactions don't get lost as they move from system "A" to system "B."
The "solution" Rosenstein refers to is Mitchell's WorkCenter system.
"One of our WorkCenter Solutions is helping facilitate the workflow of the transaction between the insurer and the salvage yard," he says. "The big salvage yards all have their own systems for doing that. From a technology perspective, however, an insurer may have to deal with multiple interfaces. For instance, if an insurer primarily does business with three different salvage vendors, chances are, it will be on three different systems. It is virtually impossible for the insurer to track and compare results between different salvage vendors because they all track things a little differently."
To remedy this, Mitchell provides an electronic connection between the insurer and the WorkCenter system. WorkCenter communicates with all of the major salvage vendors' systems. Also, if a salvage vendor doesn't have its own system, then it can use [ours] to track assignments.
Trimming Towing Fees
Another initiative from the insurer standpoint is reducing towing fees for wrecked vehicles. This is contingent upon the insurer identifying at FNOL that the covered vehicle is likely to total. Therefore, the insurer can opt to tow it to the salvage yard right away.
"That way, they don't have to tow it twice," Rosenstein says. "The cycle time on that claim then goes down, accelerating payment to the claimant and allowing the insurer to recoup money faster with salvage profits."
One benefit of optimizing the implementation and use of technology is that insurers can continually track claims in their own systems for reporting purposes. Rosenstein refers to this as the "Hawthorne Effect."
"What this means basically is that you compare how well one vendor is doing versus another by how quickly it is turning salvage around," he says. "[Systems such as WorkCenter] create efficiency. This also means you are managing salvage across many geographies and different vendors in one system instead of four or five."
For more information on total loss claims processing and tips on managing vendor relationships, be sure to check out the companion piece to this article on the Claims channel at PropertyCasualty360.com.
|Printer friendly Cite/link Email Feedback|
|Title Annotation:||Feature Story|
|Date:||Aug 1, 2012|
|Previous Article:||The analytics advantage: driving claims transformation, customer satisfaction, and regulatory compliance.|
|Next Article:||More on salvage strategy and your claims department.|